A Comment -- General Comments From an Expert (A Commentary)

The time to prepare for the earthquake and get insurance is before the earthquake, and there's still time. But today it's incredibly important that investors make sure that portfolio risk aligns with their risk tolerance. Need to have sufficient liquidity in the short term to withstand volatility. 

Be diversified by asset class like gold and geography. Perhaps today isn't the day to get into gold, though. Drawdowns have been far less in Europe. As well, not as much pain in non-market-cap-weighted US securities. Managed futures are also a strategy that does well in recession-type declines.

Most importantly, stay engaged. The tendency during these declines is to stop watching what's going on. Volatility often creates opportunity. Now, if you're one of those laid-back investors who never sweats the daily moves, keep on doing that ;)  Whatever your playbook was before, don't just disregard it now.

We had this huge 10% day, along with a spike in volatility, which can often happen within bear markets. There's a possible opportunity there. But we haven't see the follow through yet, where the bottom's in and then some days later there's another surge in volume with maybe a bit more breadth across the markets. Those types of signals would be a little more green for him.

Multiples Needed to Breakeven from Drawdowns

One of the most often misunderstood concepts in investing is the difference in percentages from a drawdown against an increase. For example, if a stock declines by 10%, a subsequent increase of 10% will not bring the investor back to breakeven, but rather an 11% increase in the price is required to break even. For example, a $10 stock declines by 10% to $9, a subsequent 10% rise from $9 brings the stock up to only $9.9. Below we have listed various drawdown percentages in increments of 10%, and the subsequent percentage increases needed to break even, along with their respective ‘multiples. For example, a 90% drawdown in the price of a $10 stock requires a 10X to bring the stock back up to $10. 
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What a year it's been last week ;)  Lots of volatility out there, but we've seen this before. Right now, we can't call it a bear market or a bull market. It's more like a "kangaroo" market with all the bouncing around. 

Uncertainty breeds volatility. But for long-term investors, volatility creates opportunity and we're seeing that at this stage. No one really knows where the bottom is. But if you're investing for the long term or for the next 12- 24 months, investors will probably be pretty pleased with the investment decisions they make today. We saw it in 2008 with the great financial crisis, and in 2018 with the US-China trade war. With the Covid crash, we ended the year at all-time highs.

It's all about patience, not panic. That's what will help in the long run.

His portfolios are more weighted towards the US. He also looks at international markets for the valuation discount. Without talking about tariffs, the US market has much more depth and choice than the Canadian one. 

US economy is very resilient. Inflation numbers have come down a bit which is good news, and unemployment is still near multi-decade lows. Consumer is still very strong, and the US consumer is 70% of GDP in the US. As long as that consumer remains strong, that will continue to help the market. 

Of course, tariffs will affect the consumer. Looking 6-12 months out, we have to ask whether tariffs will look like they do today? Remember that what they looked like a week ago changed 5-6 days later. 

Also have to consider that US mid-terms are coming up next year. The trade stance could soften. It already softened yesterday. We can see fiscal support from the US government. We may see more tax cuts and deregulation, which would help the economy. 

Sentiment has been so tough. The VIX went up above 45 and hit 60. If you look at the stats going back to 1980, typically when you go over 45 on the VIX, the 12-month return for the S&P is 37% on average.

He's not a big buyer in the gold space. His models look for intrinsic value. Gold does not have a dividend or cashflow or a revenue stream. It has done extremely well over the last year, but historical volatility can be tough.

That being said, XGD or GDX are probably your best bets.

Everybody's different. Some of us can take these ups and downs with ease, while others are glued to the TV or computer. The overarching lesson here is that, hopefully, investors came into this well prepared, well diversified with asset mixes that suited their objectives, and with portfolio target levels in place.

His firm spent January and February bringing asset levels back to target levels. Equities had run in 2023 and 2024, so any excess over target level was brought back. 

Now that we're in the current situation, just let it play out and let all the chapters be written. He's talked to a lot of clients and reminded them that we go through these events fairly often. Think back to the pandemic of 5 years ago, Brexit of 2016, GFC of 2008, 9/11, and so on. He gently asks people how they felt in the middle of that, with markets going straight down? That brings back memories of fear. 

But the lesson is that 6 weeks ago, we hit an all-time high in the markets. That means that all those past events were overcome. 

His playbook is well known -- use scare tactics and intimidation to extract greater concessions than he might get otherwise. We saw this in Canada just weeks ago when he was talking about the 51st state and diminishing us as a nation. And you saw Canada's reaction. What happened next? He got some concessions, and then he backed off.

That same playbook will likely play out with the rest of the world. But, of course, no one really knows. If you're portfolio is well structured, you should be OK.

Yes, he'd be buying for current clients with new money or for brand-new clients. This will turn out to be a good buying opportunity. Keep your head and let time work for you. Event-driven recessions (rather than economic, cyclical recessions) tend to be shorter and shallower. About halfway through a recession, the market (being a forward-looking indicator) starts to move up.

But he's not buying tactically. His firm takes a strategic approach, they're not market timers. Which means that they ride through these events, as uncomfortable as they are. His firm's approach has worked over the long term, so why mess with that?

Yes. That will be the second wave of Trumpism 2.0. First he wants to take care of tariffs, then give people a big tax break (even though they'll be paying more in tax through tariffs). The next phase is to reduce regulatory burdens on companies. 

He hears that the M&A pipeline is full, especially on the higher end. Lots of deals being either done or contemplated.

In the last few days during all these tariffs, there's been a sudden, aggressive surge in treasury yields. That's probably a key reason why Trump shifted policy on tariffs today. The 10-year yield jumped from 4% last week to 4.3% which is a very big move. That is not supposed to happen when the stock market is stressed. We don't want these rates shooting up. Bad. The spike has been counter-intuitive due to selling treasuries. Keep an eye on this. This quirk should fizzle out though, especially with this 90-day tariff pause.

Garner feels that gold is very overvalued, not this bad since summer 2011 during the debt crisis. But gold plunged 45% from its euphoric high. If that happened now, gold would fall to $1,650/ounce. Historically, gold falls in and out of periods of correlation with other assets, namely stocks. When gold breaks out, then falls below support, this is a bull trap. Recently, we saw a euphoric peak above $3,000. A breakdown below $2,900 opens a trap door downwards. A gold rally has never survived an RSI reading above 70 without a correction. And this has happened 3 times over the past decade. She expects gold to fall.